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Chapter 6 Performance Management and Appraisal Chapter Overview Performance management systems are used to identify, encourage, measure, evaluate, improve, and reward performance. Performance appraisal is the process of determining how well employees perform their jobs relative to a standard and then communicating that information to them. The chapter includes discussions about the following: The nature of performance management Identifying and measuring employee performance Performance appraisals Who conducts appraisals? Tools for appraising performance Training managers and employee in performance appraisal Appraisal feedback Performance management is linked to varying corporate cultures. Globalization requires that global organizations be aware of global cultural differences regarding performance management issues. However, most successful organizations strive to develop a performance-focused organizational culture rather than an entitlement approach. Executive commitment to performance management is a crucial aspect to a performance-focused culture. Next, different types of performance information, relevance of performance criteria, performance standards, and the performance metrics used in service businesses are explored. The next section looks at performance appraisals including the use of appraisals for administrative and development uses, important decisions about the performance appraisal process (responsibilities, informal vs. systematic, and timing of appraisals), and legal concerns. Then, the issue of who conducts appraisals is covered. Traditionally, appraisals have been conducted by an individual’s immediate supervisor, but increasingly organizations are turning to 360o (multisource) evaluation. Managers and supervisors may evaluate subordinates, team members may rate each other, outsiders such as customers may do ratings, and employees may do self-appraisals. Not to be overlooked is the possibility of employees being given the freedom to rate their managers. Next, tools for performance appraisal are described including category scaling methods, graphic rating scales, behaviorally anchored rating scales (BARS), comparative methods such as ranking or forced distribution, narrative methods such as critical incident, essay, and Management by Objectives (MBO). Each of these methods is described with the relative advantages and limitations of each. The chapter then presents a discussion of rater errors. Several errors are described—recency and primacy effects, central tendency, leniency, and strictness errors; rater bias; halo and horn effects; contrast error; similar to me/different-from-me error; and sampling errors. The chapter ends with a discussion on appraisal feedback. Hints for an effective appraisal interview are given, the reactions of managers and appraised employees are discussed, and requirements for an effective performance management system are described. Chapter Outline Well-designed performance management efforts greatly increase the likelihood that for many good performance will follow and for others poor performance will be identified and dealt with. I. The Nature of Performance Management The performance management process starts with identifying the goals an organization needs to accomplish to remain competitive and profitable. Managers then determine how they and their employees can support performance objectives by successfully completing work. The sum of the work completed in all jobs should be what is necessary to advance the strategic plan. A. Strategic Performance Management Performance management links strategy to results (Figure 6-1). However, just having a strategic plan does not guarantee that desired results will be achieved. Strategies must be translated into department- or unit-level actions. Then these actions must be assigned to individuals who are then held accountable for their accomplishment. Performance management is often confused with one of its primary components—performance appraisal. Performance management is a series of activities designed to ensure that the organization gets the performance it needs from its employees. Performance appraisal is the process of determining how well employees do their jobs relative to a standard and communicating that information to them. At a minimum a performance management system should do the following: Make clear what the organization expects Document performance for personnel records Identify areas of success and needed development Provide performance information to employees In some countries and cultures, it is uncommon for managers to rate employees or to give direct feedback, particularly if some points are negative. Employees may view criticism from superiors as personally devastating rather than as useful feedback that highlights individual training and development needs. B. Performance-Focused Organizational Cultures Organizational cultures can vary on many dimensions, and one of these differences involve the degree to which performance is emphasized. Some corporate cultures are based on an entitlement approach, which tends to mean that adequate performance and stability dominate the organization. Employee rewards vary little from person to person and have little to do with individual performance differences. As a result, performance-appraisal activities are viewed as being primarily a “bureaucratic exercise.” At the other end of the spectrum is a performance-driven organizational culture that is focused on results and contributions. Figure 6-2 shows the components of a successful performance-focused culture. However, a pay-for-performance approach can present several challenges to organizations such as the potential for creating inequity. Despite these issues, it appears that a performance-based-pay culture is desirable. It is sometimes argued that companies using the entitlement approach are not doing enough about poor performers and that failure to deal with poor performance is unfair to those who work hard. II. Identifying and Measuring Employee Performance Performance criteria vary from job to job, but common employee-performance measures include the following: Quantity of output Quality of output Timeliness of output Presence/attendance on the job Efficiency of work completed Effectiveness of work completed Specific job duties from a job description should identify the important elements in a given job and define what the organization pays employees to do. Therefore, the performance of individuals on their job duties should be measured, compared against appropriate standards, and the results should be communicated to the employee. Multiple job duties are the rule rather than the exception in most jobs. An individual might demonstrate better performance on some duties than others, and some duties might be more important than others to the organization. Weights can be used to show the relative importance of different duties in one job. A. Types of Performance Information Managers can use three different types of information about employee performance (Figure 6-3): Trait-based information identifies a character trait of the employee, such as attitude, initiative, or creativity, and may or may not be job related. Traits tend to be hard to identify, and biases of raters can affect how traits are viewed, so court decisions generally have held that trait-based performance appraisals are too vague to use when making HR decisions such as promotions or terminations. Also, focusing too much on trait characteristics can lead managers to ignore important behaviors and outcomes. Behavior-based information focuses on specific behaviors that lead to job success. Behavioral information can specify the behaviors management expects employees to exhibit. A potential problem arises when any of several behaviors can lead to successful performance, and employees rely on different behaviors to complete work. Results-based information considers employee accomplishments, and for jobs in which measurement is easy and obvious, a results-based approach works well. B. Performance Standards Performance standards define the expected levels of employee performance. Sometimes they are labeled benchmarks, goals, or targets—depending on the approach taken. Realistic, measurable, clearly understood performance standards benefit both organizations and employees. Performance standards define how satisfactory job performance is defined, so performance standards should be established before work is performed. Well-defined standards ensure that everyone involved knows the performance expectations. Both numerical and nonnumerical standards can be established. Sales quotas and production output standards are familiar numerical performance standards. A standard of performance can also be based on nonnumerical criteria. Assessing whether someone has met a performance standard, especially a nonnumerical one, can be difficult. C. Performance Metrics in Service Businesses Measuring service performance is difficult because services are often very individualized for customers, there is typically great variation in the services that can be offered, and quality is somewhat subjective. Yet the performance of people in service jobs is commonly evaluated along with the basic productivity measures used in the industry. Some of the most useful sources of performance differences among managers in service businesses are as follows: Regional differences in labor costs Service agreement differences Equipment/infrastructure differences Work volume On an individual employee level, common measures might include: Cost per employee Incidents per employee per day Number of calls per product Cost per call Sources of demand for services Service calls per day Once managers have determined appropriate measures of the service variance in their company, they can deal with waste and service delivery. III. Performance Appraisals Performance appraisals are used to assess an employee’s performance and to provide a platform for feedback about past, current, and future performance expectations. Several terms can be used when referring to performance appraisals. These include employee rating, employee evaluation, performance review, performance evaluation, or results appraisal. Performance appraisals are widely used for administering wages and salaries and for identifying individual employee strengths and weaknesses. Performance appraisals can provide answers to a wide array of work-related questions, and poor performance can sometimes be improved when a performance appraisal supplies a map to success. Even after a positive appraisal, employees benefit if the feedback helped them to determine how to improve job performance. In addition, even though an employer may not need a reason to terminate an employee, appraisals can provide justification for such actions should that become necessary. But a gap may exist between actual job performance and the way it is rated. Poorly done performance appraisals lead to disappointing results for all concerned, and there is reason to believe that evaluations can cause bad feelings and damaged relationships if not managed well. Indeed, performance reviews can be politically oriented and highly subjective in nature, which will adversely impact the relationships between managers and their employees. However, having no formal performance appraisal can weaken on-the-job discipline and harm an employee’s ability to improve, and it is entirely possible to do an appraisal well. A. Performance Appraisals and Ethics Performance appraisals may or may not focus on the ethics with which a manager performs his or her job. Managers may be expected to take an active role in managing ethics in their area of responsibility but often do not understand the process. Many companies do not have a program to develop awareness of ethics and some have no policies at all regarding ethical behavior. Discussing ethics in performance appraisals is one way to emphasize it. Rewarding ethical behavior and punishing undesirable behavior are also reasonable approaches for improving ethical practices in an organization. B. Uses of Performance Appraisals Organizations generally use performance appraisals in two potentially conflicting ways (Figure 6-4): One use is to provide a measure of performance for consideration in making pay or other administrative decisions about employees. This administrative role often creates stress for managers doing the appraisals and the employees being evaluated because the rater is placed in the role of judge. The other use focuses on the development of individuals. In this role, the manager acts more as a counselor and coach than as a judge. The developmental performance appraisal emphasizes current training and development needs, as well as planning employees’ future opportunities and career directions. Administrative Uses of Appraisals Three administrative uses of appraisal impact managers and employees the most: Determining pay adjustments Making job placement decisions on promotions, transfers, and demotions Choosing employee disciplinary actions up to and including termination of employment A performance appraisal system is often the link between employee job performance and the additional pay and rewards that the employee can receive. Performance-based compensation affirms the idea that pay raises are given for performance accomplishments rather than for length of service (seniority), or granted automatically to all employees at the same percentage levels. In pay-for-performance compensation systems, managers have evaluated the performance of individuals and have made compensation recommendations. If any part of the appraisal process fails, better-performing employees may not receive larger pay increases, and the result is perceived inequity in compensation. Many U.S. workers say that they see little connection between their performance and the size of their pay increases due to flaws in performance appraisals. Consequently, people argue that performance appraisals and pay discussions should be done separately. Two realities support this view: One is that employees often focus more on the pay received than on the developmental appraisal feedback. The other is that managers sometimes manipulate ratings to justify the pay they wish to give individuals. As a result, many employees view the appraisal process as a game, because compensation increases have been predetermined before the appraisal is completed. To address these issues, managers can first conduct performance appraisals and discuss the results with employees, and then several weeks later hold a shorter meeting to discuss pay issues. By adopting such an approach, the results of the performance appraisal can be considered before the amount of the pay adjustment is determined. Also, the performance appraisal discussions between managers and employees can focus on issues for improvement—not just pay raises. Developmental Uses of Appraisals For employees, a performance appraisal can be a primary source of information and feedback. By identifying employee strengths, weaknesses, potentials, and training needs through performance appraisal feedback, supervisors can inform employees about their progress, discuss areas in which additional training may be beneficial, and outline future developmental plans. It is clear that employees do not always know where and how to perform better, and managers should not expect improvement if they are unwilling to provide developmental feedback. The purpose of giving feedback on performance is both to reinforce satisfactory employee performance and to address performance deficiencies. The developmental function of performance appraisal can also identify areas in which the employee might wish to grow. The use of teams provides a different set of circumstances for developmental appraisals. The manager may not see all of an employee’s work, but the employee’s team members do. Team members can provide important feedback. However, whether teams can handle administrative appraisals is still subject to debate; clearly some cannot. When teams are allowed to design appraisal systems, they tend to “get rid of judgment” and avoid decisions based on a team member’s performance. Thus, group appraisal may be best suited for developmental rather than administrative purposes. C. Decisions about the Performance-Appraisal Process A number of decisions must be made when designing performance appraisal systems. Some important ones involve identifying the appraisal responsibilities of the HR unit and of the operating managers, selecting the type of appraisal system to use, and establishing the timing of appraisals. Appraisal Responsibilities If done properly, the appraisal process can benefit both the organization and the employees. The HR unit typically designs a performance appraisal system (Figure 6-5). Managers then appraise employees using the appraisal system. During development of the formal appraisal system, managers usually offer input on how the final system will work. It is important for managers to understand that appraisals are their responsibility. Through the appraisal process, good employee performance can be made even better, poor employee performance can be improved and poor performers can be removed from the organization. Performance appraisal must not be simply an HR requirement but should also be an important management process, because guiding employees’ performance is among the most important responsibilities a manager has. Type of Appraisals: Informal versus Systematic Performance appraisals can occur in two ways: informally and/or systematically. A supervisor conducts an informal appraisal whenever necessary. The day-to-day working relationship between a manager and an employee offers an opportunity for the evaluation of individual performance. A manager communicates this evaluation through various conversations on or off the job, or by on-the-spot discussion of a specific occurrence. Although such informal feedback is useful and necessary, it should not replace formal appraisal. Frequent informal feedback to employees can prevent surprises during a formal performance review. However, informal appraisal can become too informal. A systematic appraisal is used when the contact between a manager and employee is more formal, and a system is in place to report managerial impressions and observations on employee performance. This approach to appraisals is quite common. Systematic appraisals feature a regular time interval, which distinguishes them from informal appraisals. Both employees and managers know that performance will be reviewed on a regular basis, and they can plan for performance discussions. Timing of Appraisals Most companies require managers to conduct appraisals once or twice a year, most often annually. Employees commonly receive an appraisal 60 to 90 days after hiring, again at 6 months, and annually thereafter. Probationary or introductory employees, who are new and in a trial period, should be informally evaluated often—perhaps weekly for the first month, and monthly thereafter until the end of the introductory period. After that, annual reviews are typical. For employees in high demand, some employers use accelerated appraisals—every six months instead of every year. This is done to retain those employees since more feedback can be given and pay raises may occur more often. Meeting more frequently with employees may enhance individual performance. D. Legal Concerns and Performance Appraisals Since appraisals are supposed to measure how well employees are doing their jobs, it may seem unnecessary to emphasize that performance appraisals must be job related. However, it is important for evaluations to adequately reflect the nature of work performed. Companies need to have appraisal systems that satisfy the courts, as well as performance management needs. IV. Who Conducts Appraisals? Performance appraisals can be conducted by anyone familiar with the performance of individual employees. Possible rating situations include the following: Supervisors rating their employees Employees rating their superiors Team members rating each other Employees rating themselves Outside sources rating employees A variety of parties providing multisource, or 360-degree, feedback A. Supervisory Rating of Subordinates The most widely used means of rating employees is based on the assumption that the immediate supervisor is the person most qualified to evaluate an employee’s performance realistically and fairly. To help provide accurate evaluations, some supervisors keep records of employee performance so that they can reference these notes when rating performance. B. Employee Rating of Managers A number of organizations ask employees to rate the performance of their immediate managers. A variation of this type of rating takes place in colleges and universities, where students evaluate the teaching effectiveness of professors in the classroom. These performance appraisal ratings are generally used for management development purposes. Requiring employees to rate managers provides three primary advantages: In critical manager-employee relationships, employee ratings can be quite useful for identifying competent managers. This type of rating program can help make a manager more responsive to employees. This advantage can quickly become a disadvantage if the manager focuses on being “nice” rather than on managing. Employee appraisals can contribute to career-development efforts for managers by identifying areas for growth. A major disadvantage of asking employees to rate managers is the negative reaction many have to being evaluated by employees. Also, the fear of reprisals may be too great for employees to give realistic ratings. C. Team/Peer Rating Team/peer ratings are especially useful when supervisors do not have the opportunity to observe each employee’s performance but work group members do. Peer evaluations are also common in collegiate schools of business where professors commonly require students to conduct peer evaluations after the completion of group-based projects. One challenge of this approach is obtaining ratings for virtual or global teams, in which the individuals work primarily through technology, not in person (i.e., an online college class). Another challenge is obtaining ratings from and for individuals who are on many special project teams throughout the year. It is possible that any performance appraisal, including team/peer ratings, can negatively affect teamwork and participative management efforts. Although team members have good information on one another’s performance, they may not choose to share it in the interest of sparing feelings; alternatively, they may unfairly attack other group members. Some organizations attempt to overcome such problems by using anonymous appraisals and/or having a consultant or HR manager interpret team/peer ratings. D. Self-Rating Self-appraisal requires employees to think about their strengths and weaknesses and set goals for improvement. Employees working in isolation or possessing unique skills may be particularly suited to self-ratings because they are the only ones qualified to rate themselves. Overall, the use of self-appraisals in organizations has increased. However, employees may use quite different standards and not rate themselves in the same manner as supervisors. E. Outsider Rating People outside the immediate work group may be asked to participate in performance reviews. This “field review” approach can include someone from the HR department as a reviewer, or it may include completely independent reviewers from outside the organization. A disadvantage of this approach is that outsiders may not know the important demands within the work group or organization. The customers or clients of an organization are good sources for outside appraisals. For sales and service jobs, customers may provide useful input on the performance behaviors of employees. This information is commonly used for job development purposes. F. Multisource/360-Degree Rating Multi-source feedback recognizes that for many jobs, employee performance is multidimensional and crosses departmental, organizational, and even national boundaries. Therefore, it is designed to capture evaluations of the employee’s different roles from different raters to provide richer feedback during an evaluation. Significant administrative time and paperwork are required to request, obtain, and summarize feedback from multiple raters. Using electronic systems for the information can greatly reduce the administrative demands of multisource ratings and increase the effectiveness (i.e., privacy and expediency) of the process. Developmental Use of Multisource Feedback Multisource feedback focuses on the use of appraisals for the development of individuals. Conflict resolution skills, decision-making abilities, team effectiveness, communication skills, managerial styles, and technical capabilities are just some of the developmental areas that can be evaluated. Administrative Use of Multisource Feedback When using 360-degree feedback for administrative purposes, managers must anticipate the potential problems. Differences among raters can present a challenge, especially when using 360-degree ratings for discipline or pay decisions. Bias can just as easily be rooted in customers, subordinates, and peers as in a boss, and the lack of accountability of those sources can affect the ratings. “Inflation” of ratings is common when the sources know that their input will affect someone’s pay or career. Also, issues of confidentiality and anonymity have led to lawsuits. Even though multisource approaches offer possible solutions to some of the well-documented dissatisfaction associated with performance appraisals, a number of other questions have arisen as multisource appraisals have become more common. Evaluating Multisource Feedback Research on multisource/360-degree feedback has revealed both positives and negatives. More variability than expected may be seen in the ratings given by the different sources. Thus, supervisor ratings may need to carry more weight than peer or subordinate input to resolve the differences. One concern is that those peers who rate poor-performing coworkers tend to inflate the ratings so that the peers themselves can get higher overall evaluation results in return. Also, some wonder whether multisource appraisals really create sufficiently better decisions to offset the additional time and investment required. These issues appear to be less threatening when the 360-degree feedback is used only for development, so companies should consider using multisource feedback primarily as a developmental tool to enhance future job performance while minimizing the use of multisource appraisals as an administrative tool. V. Tools for Appraising Performance Performance can be appraised by a number of methods. A. Category Scaling Methods The simplest methods for appraising performance are category scaling methods, which require a manager to mark an employee’s level of performance on a specific form divided into categories of performance. A checklist uses a list of statements or words from which raters check statements that are most representative of the characteristics and performance of employees. Often, a scale indicating perceived level of accomplishment on each statement is included with the checklist, which then becomes a type of graphic rating scale. B. Graphic Rating Scales The graphic rating scale allows the rater to mark an employee’s performance on a continuum indicating low to high levels of a particular characteristic. Because of the straightforwardness of the process, graphic rating scales are common in performance evaluations. Figure 6-6 shows a sample appraisal form that combines graphic rating scales with essays. Three aspects of performance can be appraised using graphic rating scales: Descriptive categories (such as quantity of work, attendance, and dependability) Job duties (taken from the job description) Behavioral dimensions (such as decision making, employee development, and communication effectiveness) Concerns with Graphic Rating Scales Graphic rating scales in many forms are widely used because they are easy to develop and provide a uniform set of criteria to evaluate the job performance of different employees. However, the use of scales can cause rater error because the form might not accurately reflect the relative importance of certain job characteristics, and some factors might need to be added to the ratings for one employee, while others might need to be dropped. If they fit the person and the job, the scales work well. However, if they fit poorly, managers and employees who must use them frequently might complain about “the rating form.” Regardless of the scales used, the focus should be on the job duties and responsibilities identified in job descriptions. The closer the link between the scales and what people actually do, as identified in current and complete job descriptions, the stronger the relationship between the ratings and the job, as viewed by employees and managers. Also, should the performance appraisal results be challenged legally, the closer performance appraisals measure what people actually do, the more likely employers are to prevail in a lawsuit. An additional drawback to graphic rating scales is that separate traits or factors are often grouped, and the rater is given only one box to check. Another drawback is that the descriptive words sometimes used in scales may have different meanings to different raters. Behavioral Rating Scales In an attempt to overcome some of the concerns with graphic rating scales, employers may use behavioral rating scales designed to assess individual actions instead of personal attributes and characteristics. Different approaches are used, but all describe specific examples of employee job behaviors. In a behaviorally anchored rating scale (BARS), these examples are “anchored” or measured against a scale of performance levels. When creating a BARS system, identifying important job dimensions, which are the most important performance factors in a job description, is done first. Short statements describe both desirable and undesirable behaviors (anchors). These are then “translated,” or assigned, to one of the job dimensions. Anchor statements are usually developed by a group of people familiar with the job. Several problems are associated with the behavioral approaches: Creating and maintaining behaviorally anchored rating scales requires extensive time and effort. Many appraisal forms are needed to accommodate different types of jobs in an organization. C. Comparative Methods Comparative methods require that managers directly compare the performance levels of their employees against one another, and these comparisons can provide useful information for performance management. Comparative techniques include ranking and forced distribution. Ranking The ranking method lists the individuals being rated from highest to lowest based on their performance levels and relative contributions. One disadvantage of this process is that the sizes of the performance differences between employees are often not clearly indicated. This limitation can be mitigated to some extent by assigning points to indicate performance differences. Ranking also means someone must be last, which ignores the possibility that the last-ranked individual in one group might be equal to the top-ranked employee in a different group. Further, the ranking task becomes unwieldy if the group of employees to be ranked is large. Forced Distribution Forced distribution is a technique for distributing ratings that are generated with any of the other appraisal methods and comparing the ratings of people in a work group. With the forced distribution method, the ratings of employees’ performance must be distributed along a bell-shaped curve. Advantages and Disadvantages of Forced Distribution One reason why firms have mandated the use of forced distributions for appraisal ratings is to deal with “rater inflation.” The use of a forced distribution system forces managers to identify high, average, and low performers. Thus, high performers can be rewarded and developed, while low performers can be encouraged to improve or leave. But the forced distribution method suffers from several drawbacks: One problem is that a supervisor may resist placing any individual in the lowest (or the highest) group. Difficulties also arise when the rater must explain to an employee why he or she was placed in one group while others were placed in higher groups. D. Narrative Methods Managers may be required to provide written appraisal narratives. Some appraisal methods are entirely written, rather than using predetermined rating scales or ranking structures. Documentation and descriptive text are the basic components of the critical incident method and the essay methods. Critical Incident In the critical incident method, the manager keeps a written record of both favorable and unfavorable actions performed by an employee during the entire rating period. When a critical incident involving an employee occurs, the manager writes it down. This method can be used with other approaches to document the reasons why an employee was given a certain rating. Essay The essay method requires a manager to write a short essay describing each employee’s performance during the rating period. Some free-form essays are without guidelines; others are more structured, using prepared questions that must be answered. The rater usually categorizes comments under a few general headings. The essay method allows the rater more flexibility than other methods do. As a result, appraisers often combine the essay with other methods. E. Management by Objectives Management by objectives (MBO) specifies the performance goals that an individual and manager identify together. Each manager sets objectives derived from the overall goals and objectives of the organization; however, MBO should not be a disguised means for a superior to dictate the objectives of individual managers or employees. MBO Process Implementing a guided self-appraisal system using MBO is a four-stage process. The stages are as follows: Job review and agreement. Development of performance standards. Setting of objectives. Continuing performance discussions. The MBO process seems to be most useful with managerial personnel and employees who have a fairly wide range of flexibility and control over their jobs. When imposed on a rigid and autocratic management system, MBO will often fail. Emphasizing penalties for not meeting objectives defeats the development and participative nature of MBO. F. Combinations of Methods No single appraisal method is best for all situations, so a performance measurement system that uses a combination of methods may be sensible. Using combinations may offset some of the advantages and disadvantages of individual methods. When managers can articulate what they want a performance appraisal system to accomplish, they can choose and mix methods to realize advantages of each approach. Different categories of employees (e.g., salaried exempt, salaried nonexempt, maintenance) might require different combinations of methods. VI. Training Managers and Employees in Performance Appraisal Court decisions on the legality of performance appraisals and research on appraisal effectiveness both stress the importance of training managers and employees on performance management and conducting evaluations. For employees, performance appraisal training focuses on the purposes of appraisal, the appraisal process and timing, and how performance criteria and standards are linked to job duties and responsibilities. Most systems can be improved by training supervisors in how to do performance appraisals. The following list identifies some topics to be covered in appraisal training for managers: Appraisal process and timing Performance criteria and job standards that should be considered How to communicate positive and negative feedback When and how to discuss training and development goals Conducting and discussing the compensation review How to avoid common rating errors A. Rater Errors There are many possible sources of error in the performance-appraisal process. One of the major sources is the rater. Although completely eliminating errors is impossible, making raters aware of potential errors and biases helps. Varying Standards When appraising employees, a manager should avoid applying different standards and expectations to employees performing the same or similar jobs. Such problems often result from the use of ambiguous criteria and subjective weightings by supervisors. Recency and Primacy Effects The recency effect occurs when a rater gives greater weight to recent events when appraising an individual’s performance. Another time related issue is the primacy effect, which occurs when a rater gives greater weight to information received first when appraising an individual’s performance. Central Tendency, Leniency, and Strictness Errors Appraisers who rate all employees within a narrow range in the middle of the scale (i.e., rate everyone as “average”) commit a central tendency error, giving even outstanding and poor performers an “average” rating. The leniency error occurs when ratings of all employees fall at the high end of the scale. The strictness error occurs when a manager uses only the lower part of the scale to rate employees. Rater Bias When a rater’s values or prejudices distort the rating, rater bias results. Such bias may be unconscious or quite intentional. Use of age, religion, seniority, sex, appearance, or other “classifications” may also skew appraisal ratings if the appraisal process is not properly designed. A review of appraisal ratings by higher-level managers may help correct this problem. Halo and Horns Effects The halo effect occurs when a rater scores an employee high on all job criteria because of performance in one area. The opposite is the horns effect, which occurs when a low rating on one characteristic leads to an overall low rating. Contrast Error The contrast error is the tendency to rate people relative to one another. Although it may be appropriate to compare people at times, the performance rating usually should reflect comparison against performance standards, not against other people. Similar-to-Me/Different-from-Me Errors Sometimes, raters are influenced by whether people show characteristics that are the same as or different from their own. The error comes in measuring another person against the rater’s own characteristics rather than measuring how well the individual fulfills the expectations of the job. Sampling Error If the rater has seen only a small sample of the person’s work, an appraisal may be subject to sampling error. Ideally, the work being rated should be a broad and representative sample of all the work completed by the employee. VII. Appraisal Feedback After completing appraisals, managers need to communicate results to give employees a clear understanding of how they compare to performance standards and organizations’ expectations. The appraisal feedback interview provides an opportunity to clear up any misunderstandings on both sides. A. The Appraisal Interview The appraisal interview presents both an opportunity and a challenge. It can be an emotional experience for the manager and the employee because the manager must communicate both praise and constructive criticism. A major concern for managers is how to emphasize the positive aspects of the employee’s performance while still discussing ways to make needed improvements. Employees usually approach an appraisal interview with some concern. They may feel that discussions about performance are both personal and important to their continued job success. At the same time, they want to know how their managers view their performance. Figure 6-7 summarizes hints for an effective appraisal interview for supervisors and managers. B. Reactions of Managers and Employees Managers who must complete evaluations of their employees sometimes resist the appraisal process. Many feel that their role requires them to assist, encourage, coach, and counsel employees to improve their performance. However, being a judge on the one hand and a coach and a counselor on the other hand may cause internal conflict. Knowing that appraisals may affect employees’ future careers also may cause altered or biased ratings. This problem is even more likely when managers know that they will have to communicate and defend their ratings to the employees, their bosses, or HR specialists. Managers can simply make the employee’s ratings positive and avoid unpleasantness. But avoidance helps no one. A manager owes an employee a well-done appraisal, no matter how difficult an employee is, or how difficult the conversation about performance might be. Employees may well see the appraisal process as a threat and feel that the only way for them to get a higher rating is for someone else to receive a low rating. Likewise, employees being appraised may not necessarily agree with the manager doing the appraising. However, in most cases, employees will view appraisals done well as what they are meant to be—constructive feedback. C. Effective Performance Management To be effective, a performance management system, including the performance appraisal processes, should be: Beneficial as a development tool Useful as an administrative tool Legal and job related Viewed as generally fair by employees Effective in documenting employee performance Clear about who are high, average, and low performers Instructor Manual for Human Resource Management: Essential Perspectives Robert L. Mathis, John Jackson, Sean Valentine 9781305115248

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